Case on star bucks

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Case on Starbucks Accomplishment

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Case on Star bucks accomplishment

Transcript of Case on star bucks

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Case on

Starbucks Accomplishment

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Company Background Starbucks began in 1971 when three academics—English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker—opened a store called Starbucks Coffee.

Each invested $1,350 and borrowed another $5,000 from a bank to open the Pikes Place store.

The inspiration for the Starbucks enterprise was a Dutch immigrant, Alfred Peet, who had begun importing fine Arabica coffees into the United States during the 1950s.

For most of the first year, Starbucks ordered its coffee beans from Peet's.

Later purchased a used roaster from Holland and set up roasting operations in a nearby ramshackle building.

. A second Starbucks store was opened in 1972.

BY the early 1980s, the company had four Starbucks stores in the Seattle area and could boast of having been profitable every year since opening its doors

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Howard Schultz Enters the Picture

Howard Schultz, vice president and general manager of U.S. operations for Hammarplast—a Swedish maker of stylish kitchen equipment .

He went to visit STARBUCKS in order to understand the quality and variety which is offered.

Schultz met with Jerry Baldwin and Gordon Bowker, whose offices overlooked the company's coffee-roasting operation.

Baldwin told Schultz, "We don't manage the business to maximize anything other than the quality of the coffee”.

Schultz was struck by the business philosophy of the two partners.

It was also clear to Schultz that Starbucks was strongly committed to educating its customers to appreciate the qualities of fine coffees, rather than just kowtowing to mass-market appeal.

Later Howard Schultz has joined STARBUCKS as senior Marketing Manager to expand outlets in US and Canada.

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Schultz's Growing Frustration Baldwin and Bowker did not like the idea of changing format of STARBUCKS.

They were excited by an opportunity to purchase Peet's Coffee and Tea. The acquisition took place in 1984.

It took Howard Schultz nearly a year to convince Jerry Baldwin to let him test an espresso bar.

After Baldwin relented, Starbucks' sixth store, which opened in April 1984, became the first one designed to sell beverages and the first one in downtown Seattle.

Within two months the store was serving 800 customers per day.

Schultz was elated by the test results; his visits to the store indicated that it was becoming a gathering place and that customers were pleased with the beverages being served.

Schultz left Starbucks in late 1985.

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Starbucks as a Private Company: 1987–92 Starbucks to become a

national company with values and guiding principles that employees could be proud of.

The new Starbucks had a total of nine stores.

The business plan Schultz had presented investors called for the new company to open 125 stores in the next five years.

Lawrence Maltz, who had 20 years of experience in business, was hired as executive vice president and charged with heading operations, finance, and human resources.

To symbolize the merging of the two companies and the two cultures, a new logo was created that melded the Starbucks and Il Giornale logos.

The Starbucks stores were equipped with espresso machines and remodeled to look more Italian than Old World nautical.

The traditional Starbucks brown was replaced by Il Giornale green.

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Expansion into Markets Outside the Pacific Northwest The first Chicago store

opened October 27, 1987, the same day the stock market crashed

Three more stores were opened in Chicago over the next six months, but customer counts were substantially below expectations.

By 1991, the Chicago stores had become profitable and the company was ready for its next big market entry.

L.A. consumers embraced Starbucks quickly—the Los Angeles Times named Starbucks as the best coffee in America before the first L.A. store opened.

The entry into San Francisco proved more troublesome .

The opening of 150 new stores in five years significantly exceeded the 1987 business plan’s objective of 125.

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Schultz’s a Great Place to Work

Providing health care benefits to part-time workers

Schultz turns all Starbucks employees into partners

Starbucks was able to attract motivated people with above-average skills and good work habits not only because of its fringe benefit program but also because of its pay scale

Values and Principles

One of the major Principle was not selling of artificially flavoured coffee beans

Having proper and trained Employees

The Importance of pleasing customers And Customer satisfaction

Serving the customer according to their need and requirement

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STORE EXPANSION STRATEGY

Developed a three-year geographic strategy.

Select large cities to serve as a ‘hub’

Goal of opening 20 or more stores in the hub

Revenue increased from $427,000 to $700,000

Best site location record (1997)

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STORE DEVELOPMENT In-house team of architects.

An attractive store furniture.

Store size from 1000-1500 sq. feet

Space was leased

Similar materials were used in all the stores.

Stores were opened in office buildings, airport terminal, university campus, etc.

A ‘store of future’ team was formed in 1995.

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PRODUCT LINE

Decaffeinated coffee

Fresh roasted whole bean coffees

Fresh pastries and other food items

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Employee Training

"We want passionate people who love coffee . . . We're looking for a diverse workforce, which reflects our community. We want people who enjoy what they're doing and for whom work is an extension of themselves.“

Workshop called "Brewing the Perfect Cup.“

Management trainees attended classes for 8 to 12 weeks

Starbucks Coffee School in San Francisco

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Product Supply Dave Olsen, Starbucks' senior vice president

for coffee regularly visits Colombia, Sumatra, Yemen, Antigua, Indonesia, Guatemala, New Guinea, Costa Rica, Sulawesi, Papua New Guinea, Kenya, Ethiopia

Price volatility due to weather, economic, and political conditions in the growing countries & as per agreements with International Coffee Organization and the Association of Coffee

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Roasting Coffee Beans Each batch was roasted in a powerful gas

oven for 12 to 15 minutes

Highly trained and experienced roasting personnel monitored the process, using both smell and hearing, to judge when the beans were perfectly done

coffee beans make a popping sound when ready

Dave Olsen checked coffee samples from the roasting process, sniffing the aromas, tasting sample cups, and recording his observations in a logbook

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Bonding with Customer

About 5 million customers per week were patronizing Starbucks stores in early 1998

Loyal customers patronized a Starbucks store 15 to 20 times a month, spending perhaps $50 monthly.

Baristas became familiar with regular customers, learning their names and their favourite drinks

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Mail Order Sales

Mail-order catalog distributed 6 times a year

It offered coffee, candies and pastries, and select coffee-making equipment and accessories

Starbucks management believed that its direct-response marketing effort helped pave the way for retail expansion into new markets and reinforced brand recognition in existing markets

Mail-order catalog distributed 6 times a year

It offered coffee, candies and pastries, and select coffee-making equipment and accessories

Starbucks management believed that its direct-response marketing effort helped pave the way for retail expansion into new markets and reinforced brand recognition in existing markets

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Joint Venture In 1994, after months of meetings and

experimentation, PepsiCo and Starbucks entered into a joint venture arrangement to create new coffee-related products for mass distribution through Pepsi channels, including cold coffee drinks in a bottle or can.

The joint venture's first new product, Mazagran, a lightly flavored carbonated coffee drink, was a failure; when test- marketed in southern California, some consumers liked it and some hated it.

. Despite the clash of cultures and the different motivations of the two partners, the partnership held together because of the good working relationship that evolved between Howard Schultz and Pepsi's senior executives

After months of experimentation, the joint venture product research team came up with a shelf-stable version of Frappuccino that tasted quite good. Sales of Frappuccino reached $125 million in 1997 and achieved national supermarket penetration of 80 percent

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In October 1995 Starbucks partnered with Dreyer's Grand Ice Cream to supply coffee extract for a new line of coffee ice cream made and distributed by Dreyer's under the Starbucks brand. The new line, featuring such flavors as Dark Roast Espresso Swirl, JavaChip, Vanilla MochaChip, Biscotti Bliss, and Caffe Almond Fudge, hit supermarket shelves in April 1996.

Also in 1995, Starbucks worked with Seattle's Redhook Ale Brewery to create Double Black Stout, a stout beer with a shot of Starbucks coffee extract in it.

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International Expansion In markets outside the continental United States

(including Hawaii), Starbucks' strategy was to license a reputable and capable local company with retailing know-how in the target host country to develop and operate new Starbucks stores.

Starbucks created a new subsidiary, Starbucks Coffee International (SCI), to orchestrate overseas expansion and begin to build the Starbucks brand name globally via licensees; Howard Behar was president of SCI.

Going into 1998, SCI had 12 retail stores in Tokyo, 7 in Hawaii, 6 in Singapore, and 1 in the Philippines. Agreements had been signed with licensees to begin opening stores in Taiwan and Korea in 1998.

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Corporate Responsibility Starbucks was the largest corporate contributor

in North America to CARE, a worldwide relief and development organization that sponsored health, education, and humanitarian aid programs in most of the Third World countries where Starbucks purchased its coffee supplies; Starbucks began making annual corporate contributions to CARE when it became profitable in 1991.

In 1995 Starbucks began a program to improve the conditions of workers in coffee-growing countries, establishing a code of conduct for its growers and providing financial assistance for agricultural improvement projects.

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In 1997, Starbucks formed an alliance with Appropriate Technology International to help poor, small-scale coffee growers in Guatemala increase their income by improving the quality of their crops and their market access.

Starbucks had an Environmental Committee that looked for ways to reduce, reuse, and recycle waste, as well as contribute to local community environmental efforts. There was also a Green Team, consisting of store managers from all regions

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Starbucks key terms

Starbucks Corporation has been the most successful coffee chain in the past few years using their aggressive expansion strategies to push out much of its competition.

Starbucks has focused on creating a dense network of stores all around America, while also opening up new locations all around the world.

They are currently leading the retail coffee market with selling their coffee for a premium price to increase their profitability.

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Competitors of Starbucks

Dunkin’Dounts,

Caribou Coffee,

Mc Donald’s

Coffee manufacturing like Kraft, Nestle which distribute coffee to supermarket.

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Store Locator

Has 12,500 coffee shops in the United States

McDonald’s McCafé

Starbucks

Dunkin’ Donuts Has 6,700 coffee

shops in the United States

Caribou Coffee

Has over 31,000 restaurants World Wide.

Has 415 coffee shops in 16 States in the United States

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Price

BrandQuality

Convenience

Location

Variety Reputation

Customization

Online user

Low

High

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